Teri Bernstein, MBA, CPA has been teaching full time in the Business Department of Santa Monica College since 1985. Prior to that, she worked in Internal Audit and Special Financial Projects for the 1984 Los Angeles Olympics, CBS, Inc., and Coopers & Lybrand. She attended the University of Michigan and Wayne State University.
this distribution will no longer hold...
With their higher tuitions and often incredible academic preparation, international students have become an important component of American colleges and universities. Often, using special visas, these students stay in the U.S., utilizing their skills in high tech industries and other areas where there is a demand for specially qualified candidates. Not only do these students help balance public college budgets, they also add $31 billion to the U.S. economy.
Trump's travel ban has radically diminished the attractiveness of a U.S. education for many foreign students. Not only have some continuing students been denied re-entrance to the U.S.--foreign families are thinking twice about sending their young adults to a country where hate speech and anti-foreign sentiments are on the rise. Coming home for holidays and semester breaks will be increasingly difficult.
It will be interesting see if colleges and universities protect their customer base and find a way to pressure the government to take a neutral stance. Silicon valley companies have already begun to lobby against the travel sanctions. Legal realities, however, may not be able to counteract the perception that has already spread world-wide.
Source: "The drop in a lucrative commodity: international students," by David Brancaccio, with others, Marketplace Morning Report: American Public Media, March 28, 2017.
photo from mppleasantacademy.com, a therapeutic ranch
Not everyone excels in middle school and high school. Many find themselves unable to stay out of trouble or unable to apply themselves to schoolwork. Parents, worried for their children's future success prospects, sometimes feel unable to be effective to help.Therapy programs involving outdoor challenges and working with animals are sometimes tried. Kenneth R. Rosen describes his experience doing "long periods of hard labor" (digging post holes, training horses) as eventually making a difference. In his words:
"The payday came several months later, when I left the program. I was now equipped with the knowledge that with the right set of tools and the right preparation, it was possible to set a goal and reach it, one post hole at a time."
Mr. Rosen now writes for the New York Times and is a Logan Nonfiction Fellow at the Carey Institute for Global Good.
Source: "At a Therapeutic Ranch, No Payday Until Later," by Kenneth R. Rosen, New York Times: "On Work", March 24, 2017.
image from the Better Business Bureau
If you sign up for an online budgeting and bookkeeping system like Mint, you agree to allow them access to your credit card and banking transactions. What they (and other tech companies) might do with the information is market loans and other products to you, based on your individual situation. Your financial data is valuable as high-quality targeted marketing information...and banks are not pleased that tech companies want access to it. Recently,
"...several large banks have been pushing to restrict the sharing of this kind of data with technology companies, according to the tech firms. In some cases, they are refusing to pass along information, like the fees and interest rates they charge. Both sides see big money to be made from the reams of highly personal information created by financial transactions." (NYT)
One of the "reasons" cited by the banks for not wanting to share the information, is the lack of regulations in place for how the tech companies are allowed to use the information. For example, if you have granted Mint the right to your credit card data, is Mint allowed to sell your shopping information in ways that are forbidden to banks? Or is an underlying reason the possibility that Mint will give YOU, the customer, more information about how high the fees are that are charged by your bank?
The Consumer Finance Protection Bureau's chief, Richard Cordray, believes that banks have not granted customers adequate control over their own financial data. Customers do not know the kinds of data that are being collected by banks, nor the uses to which that data is being put.
As I wait (and wait) after my groceries are all bagged at the grocery store for my chip card to transmit all of my shopping data to my credit card bank, I ponder just what will be done with all this detailed information that is being gathered. Hmm...
Source: "Banks and Tech Firms Battle Over Something Akin to Gold: Your Data," by Nathaniel Popper, New York Times, March 23, 2017.
image from The Street
The tontine is an investment vehicle with a shady reputation...but with a certain logic for retirees who might live longer than they ever imagined when they were doing their financial planning. Putting aside the sinister aspects for a moment, here is how it works:
The tontine allows for a person who lives a long time to still have income--an increasing amount of income that may allow for inflation or increased health care expenses. on the other hand, the death of tontine member B is a plus for member A, which might be considered a motive in suspicious circumstances.
The tontine began in the 1600's in Europe, and was legal in the United States until the early 1900's. They were outlawed because of bad record-keeping and insurance company embezzlements. But their simplicity and their advantages for an aging population may make tontines viable in today's more regulated--and computerized--environment.
Analysts that see advantages in tontines for the current day include:
However, other analysts believe that it is right that a tontine is an "outlawed financial product." Popular fiction by Agatha Christie, Robert Louis Stevenson, and P.G. Wodehouse have played up the murderous possibilities. "The Curse of the Flying Hellfish" on The Simpsons has a similarly sinister theme.
Even those that support the resurgence of tontines say that additional regulations will need to be put in place before they become a viable investment vehicle.
Source: "When Others Die, Tontine Investors Win," by Tom Verde, New York Times: "Retiring," March 24, 2017.
image from CreditCards.com
Often parents who have had an imperfect personal financial history want to make sure that their young adult offspring do not have the same problems as they did. Because credit history is not shared (even spouses have different credit scores), it is possible for the younger generation to do better than their parents. But, because it takes good credit to get more credit, it is sometimes difficult to get started.
One parental credit account that has a good credit history can be the basis of establishing good credit for the young adult. "Good credit history" means:
The young adult can first be an "authorized user" on the card, and after several months of good financial practices can apply for credit on their own at the same bank. Good practices may include, for example, paying off the statement balance in full each month, or only letting a balance be outstanding for a month or two--during which more than the minimum payment is made.
Nevertheless, good credit is the responsibility of each individual, over a long time span. It can make a big difference in the quality of life.
Source: "How parents with less-than-stellar credit can help their kids get a credit card," by Virginia C McGuire, Los Angeles Times, March 25, 2017.
2017 information is linked below
The information gleaned from the internet can require the application of considerable critical thinking before being accepted as relevant to one's personal situation...or even true at all. In this nascent age of big data and its sometimes clumsy attempts at directed marketing, information can arrive in a personal email that--to put it mildly--may not be relevant.
I received an email from Coursera, which is a consortium of online classes that are career directed. The email listed the "10 Best Jobs for 2017." Why did I receive this email? My web searches related to this blog might have misled marketers into thinking I am a college student or someone casting a wide net for business opportunities.
The "10 Best" list was a truncated version of the "50 Best Jobs in America" according to a matrix developed by Glassdoor, a resource ostensibly for job applicants (but beneficial to employers as well). Their top 10 jobs:
It is not surprising that Coursera has a body of offerings that would qualify an individual for each of these positions. So what questions should anyone receiving this promotional email ask themselves? For starters:
image from biz journals.com
In introductory Accounting and Business courses, the basic principles of business ownership are covered. Corporations sell shares of stock to raise money to invest in their business plan. Stock owners have the right to vote (one share, one vote is the default provision). They also get to participate in profits, dividend distribution, and liquidation on a pro-rata basis.
These seemingly straightforward principles were somehow muddled in the 2013 Dole buyout. A shareholder lawsuit against David Murdock (CEO and major shareholder) resulted in a $115.7 million settlement...or an additional $2.74 per share in addition to the money they originally received in the buyout. However: "...because of the shareholder ownership system, some of those Dole shareholders may not get that money."
Regardless of what their online or quarterly statements say, shareholders do not actually own the shares that they buy. This is because:
"Share ownership in the United States is conducted through the Depository Trust Company, which was formed after the back-office scandal of the early 1970s. At that time, trading volume on Wall Street became too much to handle, and brokerage firms were swamped by paperwork, falling months behind. The idea was to freeze ownership of company shares in one place. Now, when Apple or Microsoft look at their share register they see only the Depository Trust Company. When trading occurred, brokers would now transfer shares among accounts at the trust company. The brokers hold the shares on behalf of customers who were the ultimate beneficial owners."
Since all the transactions are technically conducted by the Depository Trust Company, brokers can transfer shares among stockholders without conducting a trade in that person's name. This allows them to "cover" short sales, as long as they make things right when everything settles out. But, sometimes, "the Depository Trust Company sometimes can’t keep track of shares. When this happens, it puts a 'chill' on the shares, meaning that it stops tracking them because it is too hard to do so in the final three trading days up to the closing of a merger."
Things really got mixed up in the Dole transaction...and the result was that even though Dole had only 36,793,758 shares outstanding, claims for 49,164,415 shares were made in the lawsuit. These claims are likely to be legitimate. The beneficiaries of this mix-up were probably the investors involved in short sales...and technically they should be coming up with the $2.74 per share that they really owe to the other shareholders, in order to cover their short bet. But the stock owners in the 2013 buyout transaction will be hard to track down...especially since they were even hard to keep track of contemporaneously.
One long-term solution to similar situations, according to Matt Levine of Bloomberg View, is to use blockchain technology, on which Bitcoin is based. But how will the current Dole problem be resolved?
Source: "Dole Case Illustrates Problems in the Shareholder System," by Steven Davidoff Solomon (with Andrew Ross Sorkin), New York Times DealBook, March 21, 2017.
The unusually high amount of rainfall this winter in Southern California and elsewhere in the Southwest has created a spectacular event: the desert "superbloom." Spring brings desert blooms every year, but 2017 is expected to be the best year since the 1990's. According to Linda Haddock, Executive Director of the Borrego Springs Chamber of Commerce, "once the word gets out that a great bloom is upon the desert, people will flock to the area. Estimates of how many folks visit the park annually range from half-a-million to 1.5 million."
Since there are not many hotels in the Borrego Springs area, demand is up and prices are higher than normal. As of Tuesday, hotels in the Anza Borrego Desert are being advertised as having "1 room left" and are priced in the $400 per night range. Even La Quinta's lowest room price is $249, when the usual rates are $129 to $149. But the internet is not always accurate. By phone and in person, the word is that every room has been booked for several weeks, and that locals are renting out rooms as unofficial Airbnbs.
The laws of supply and demand seem to be holding. Sales for all hospitality/tourism venues should break all records this year. We'll wait for the quarterly report.
Source: "Rains Bring Promise of Spectacular Desert Flowers," by J. Harry Jones, San Diego Union-Tribune, January 31, 2017.
Trump's business partners from India
Profiting from having a position in the U.S. government is illegal. There is an "Emoluments Clause" in the U.S Constitution--Article I, Section 9, Clause 8:
"No title of nobility shall be granted by the United States: and no person holding any office of profit or trust under them, shall, without the consent of the Congress, accept of any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state."
Emoluments are "the returns arising from office or employment usually in the form of compensation or perquisites" (Merriam-Webster Dictionary). The 45th President is in the position of currently receiving such remuneration due to his ownership positions in the following, for example:
The purpose of the Emolument Clause was to ensure that the President remained independent of any foreign influence.
A group of lawyers, including Zephyr Rain Teachout and constitutional lawyers Laurence Tribe and Erwin Chemerinsky, is suing Trump for violating this clause. Teachout tells a story about Benjamin Franklin receiving a gift from the French King--a 2" by 2 1/2" painting...that was in a frame that included 480 top-quality diamond. It created an ethical dilemma, as the young country did not want any taint of foreign influence. The incident prompted the clause to be written--to lessen the chance of corruption.
CPA's have a concept regarding independence that disallows the appearance of corruption as well as actual corruption. Perhaps that principle was what the founding fathers had in mind. On the other hand, the founding fathers did put in an escape clause: Congress could just "consent" to any and/or all of these profitable relationships.
Source: "Episode 759: Can Trump Take the Money?" by Noel King and Robert Smith, NPR: Planet Money, March 10, 2017. [podcast and transcript]
The Riveter is a quarterly print magazine that is also published online. It was started by female journalism students from Minnesota who felt that women were under-represented in the shrinking number of magazines that still published in-depth, long-form articles. According to the Star Tribune, "...its short history resembles those of a growing pool of start-ups: Secure funding for idea online (first Indiegogo, and more recently, a Kickstarter that raised $35,000 last spring). Then, continue growth through networking, events and brand development."
The three entrepreneurs who started the business--Natalie Cheng, Kaylen Ralph and Joanna Demkiewicz--identify as a "local business." In order to effectively grow their customer base, "the Riveter has paired up with others in retail and food and beverage to boost one another’s ventures. Most of their counterparts are also of the “young professional” variety who have flocked to the Twin Cities; a New York Times Upshot article last fall declared the city as the best for budding careerists."
Other types of publications or online venues that present female perspectives include:
The following publications are closer to The Riveter in terms of long-form journalism, but have their own niche demographic as well:
These magazines "Aren't Just For Women," according to the New York Times. Have you read any of them yet?
Hand-held hops: image from article linked below
Like all manufactured products, the price of beer is dependent on the price of its components. One key component of beer is "hops." Hops are the flowers of a particular plant that are used to flavor beer.
For example, Eagle Rock Brewery's Milo Oatmeal Pale Ale, is made with El Dorado hops, which cost Eagle Rock $9.90 per pound. Some hops sell for more than $15 per pound. Hops are the most expensive ingredient in beer.
Thomas March, a professor who studies the hops market and teaches at Washington State University, explains that the price of hops is a matter of negotiation between an individual grower and a beer maker, rather than being on any kind of public exchange:
“The only real publicly available price is that one from USDA once a year. But that’s a weighted average. It really doesn’t tell us much -- what’s going on with a particular variety.”
I don't drink beer, so I have no idea how important the individual flavoring components are. However, my friends tell me that beer flavors are complex and varied, which might explain why the pricing for hops is both secretive and critical to the beer-making process.
Source: "From farm to glass: How hops are priced," by Robert Garrova, Marketplace: American Public Media, December 16, 2016.
The business-to-business relationships between the United States and Germany are compelling enough to inspire a conference earlier this year. In the macro-economic sense, the U.S-German economic relationship is also significant.
Angela Merkel, the German Chancellor for 16 years, will be meeting with U.S. President Donald Trump this week. German sources say she is "doing her homework" and is looking to repair, in person, a relationship that has been contentious in media sound-bites.
A major focus of the talks is anticipated to be the trade relationship between the two countries. Some of the relevant factors include:
We'll have to wait and see what arises from these talks.
Source: "Let's Do The Numbers: The U.S. Relationship With Germany," by Jana Kasperkevic, Marketplace: American Public Media, March 16, 2016.
photo from Geirix/Reuters
At a news conference held in Reykjavik (Iceland) over the weekend, the final elimination of the economic controls that have been in place since 2008 was announced by Mar Gudmundsson (governor of the central bank), Bjarni Benediktisson (Prime Minister), and Benedikt Johannesson (finance minister). These controls had been put in place to stabilize the currency and the financial markets. The government efforts successfully created the best economic recovery in Europe.
One aspect of the controls, however, was that international investments and money held outside of Iceland were frozen. As part of the lifting of controls, the government will exchange 137.5 Icelandic krona for every Euro in offshore assets. Bankers and businesses affected by the controls are relieved that this period is (finally) over.
Much of Iceland's rebound has been the result of increasing tourism. After having seen the Icelandic TV series, Trapped, I hope to be one of the tourists contributing to the Icelandic economy.
Source: "Iceland Will Lift Remaining Capital Controls in Place Since 2008," by Reuters, New York Times, March 12, 2017.
When Antwan Andre Patton ("Big Boi") sought investment advice, he was told "Invest in what you know." Since he and his brother were major dog lovers, and had an uncle who was in the business of breeding Chows, they decided to open a dog breeding operation. Pitfall Kennels specializes in English bulldogs, French bulldogs, and American bulldogs. They started the business with pit bulls, but branched out into other breeds and continue to develop their own bloodlines.
The breeding operation is top-of-the-line in terms of dog care: hot and cold running water, air-conditioning and heat, incubators for newborns, a huge meadow where the dogs can run free, and lots of tender, loving care.
from the Pitfall Kennels website
Source: "Business As Usual: Inside Big Boi's Dog Breeding Biz," by Live Nation TV, June 8, 2016.Pitfall Kennels update, January 29, 2017.
image from LinkedIn
Doing your taxes is hard enough, without have to deal with jargon that is difficult to understand. Here are ten phrases which many tax accountants want to eliminate from their vocabulary, since they are often misunderstood:
U.S. News and World Report also links several informative tax-related articles within this list.
Source: "Making Sense of 10 Confusing Tax Phrases," by Susannah Snider, U.S. News and World Report, March 9, 2017.
We all make mistakes at work. Some are minor, some have a cascading effect, and some are so public, mortifying and over-the-top that they enter a category of their own. An example of this last type is the viral video of kids "video bombing" the interview on North Korea with Professor Robert Kelly. Professor Kelly handled the situation with stoicism, attempting not to get involved. In other words, he attempted--without success--to ignore the problem in order to continue with the interview.
Notice the details in how he set up the background for the interview: a desk, a map (not too firmly) affixed to the wall, a row of books on the bed, a bookshelf in the background. A few details, however, were overlooked--a lock on the door and a commanding distraction for the kids. This is a great example of the issues that may arise when one works from home.
Source: "Robert Kelly's live TV interview crashed by his kids," posted by Leslie Sanchez, BBC News, March 10, 2017.
Management often seems to be a set of complicated skills. But the basic principles of good management parallel the attributes of effective horse training, according to Andrew Froggatt, a horse trainer turned management consultant. He suggests that the following principles are key:
As in human work life, the most productive and highly skilled workers (race horses) can be difficult to manage, but following these principles may enable the manager to create a working relationship that allows the most talented to do their best.
Who knew that horsing around at work could be a good thing?
Source: "What horse trainers can teach us about managing people at work," from BBC News, March 13, 2017. [podcast]
A few years ago, a populist president was elected in Argentina--Cristina Kirchner. She decided to "fix the economy" by limiting imports and requiring companies to manufacture in Argentina the majority of the goods they sold in Argentina. Moreover, and perhaps not coincidentally, she required the manufacturing facilities to be built in a location in which she had a pocket of concentrated electoral support--Tierra del Fuego.
Tierra del Fuego is at the very southernmost tip of South America. It is remote, horribly windy, and the closest city to Antarctica. For any manufacturing to take place there, new facilities had to be built, as it was not a natural business hub for both logistics reasons and the lack of a labor force. Apple, Inc. did not want to manufacture there, so it decided to forego Argentinian sales. BlackBerry, however, was willing to go into the Argentinian market, and built a facility in Tierra del Fuego as required. But to get a labor force, BlackBerry had to pay very high salaries (similar to the U.S. labor market for pipeline jobs in Alaska). The increased costs led to the domestic price of a BlackBerry smartphone being much higher than it was anywhere else. Once other market solutions evolved, this was not good for sales.
Other businesses also took the same path as BlackBerry, and ultimately, all these businesses failed. They could not make a profit.
Maybe Argentina should have stuck to the specialties in which it was economically competitive: wine, beef and biofuels. Oh--and the tango...
Source: "Episode: 755: The Phone at the End of the World," by Stacey Vanek Smith and Jacob Goldstein, NPR Planet Money, February 17, 2017.
image from the website of the podcast linked below
One activity that can be more stressful that work is dating--particularly online dating. However, an economic reporter from Planet Money, Lisa Chow, took a systematic analysis approach to this process. And, independently, Tim Harford, who now writes the "Underground Economist" column for the Financial Times, wrote a column called "Dear Economist" from 2003-2011, in which he answered questions about love, dating, and other personal matters by applying economic principles and analysis.
Chow's process was practical. It entailed creating a spreadsheet and applying efficiencies to the online dating process. These included:
Chow's process worked for her: she is now happily married.
Harford's approach was to first articulate an economic principle and then apply it to a particular situation. One example he addressed in the interview related to the principles of scarce resources and maximizing satisfaction. One non-renewable resource is time (clearly a scarce resource)...and generally spreading one's resources thinly prevents a person from achieving optimal satisfaction in any area. Therefore, the suggestion was to perhaps cut down on the number of relationships in which the the letter writer was involved.
With modifications, the principles could also be applied to networking and work relationships.
Source: "Episode 513: Dear Economist: I Need a Date," by Chana Joffe-Walt, with Lisa Chow, Tim Harford, and Robert Smith, NPR: Planet Money, March 1, 2017. [podcast and transcript]
Bissell has made its reputation in the home carpet shampooing market. They have especially marketed their products for cleaning up spots and stains on rugs and upholstery that has been caused by a pet. Now they have branched out by creating a product that will give your pet a bath--using the same mechanism that is employed in their carpet-cleaning products.
In case you have never used a machine to clean your carpets yourself, here is how it works: first, you glide the machine over the area to be cleaned, with your finger on a trigger that releases a cleaning solution. Then, you go over the area, allowing the cleaning bristles to help the solution penetrate and clean the fibers, as well as vacuum up the embedded dirt. The third step is to slowly go over the same area several times, to remove all of the water and soap solution that was deposited, so that drying is more rapid.
As you can see from the demonstration video above, this is an exact parallel to the way the BarkBath works. I wish I had been in the product development meeting when this product was pitched. There does seem to be some logic to it--dogs get dirty, grooming is expensive, dog hair has some similarity to carpet fibers, and getting a dog to take a bath can be challenging and messy--particularly when the dog does a full body shake to dry herself off. A convenient product that solves these issues might seem like a product with a potential market.
The BarkBath will be available in May 2017 and will retail for about $150.
Sources: Bissell's YouTube video above and pet-advice blog.
image from Simple Programmer
Two issues tend to keep people "stuck" in jobs that they may not like: paid employer healthcare and pensions. Millennials are prone to changing jobs anyway--and it seems that some solutions may be arising to address both of those issues. The Affordable Care Act has allowed many people access to healthcare insurance that is independent of a particular job (and sometimes employers help with the premiums, rather than providing their own plan).
Now a pension plan for "job hoppers" is in the works in Maryland. There is broad support for this plan among state legislators form both parties, but there are federal law hurdles that need to be overcome before it can be implemented.
The idea started with Corey Polyoka and Hannah Ragan of Foodshed. They wanted to offer employees in their group a pension plan, but individual employer-run plans were too complicated and expensive with respect to administrative costs. Having a portable plan that could be employee-owned, so it could be maintained when the employee switched companies, seemed like a way to have ONE administrative function and maximum flexibility. This would be different that the limited provisions for individually-maintained IRAs. But the idea of a payroll deduction and a matching employer contribution do not fit into existing pension laws if the account is portable and linked to the employee rather than the company.
It is in the national interest (as well as personal interest) for individuals to plan and save for retirement--but it is often a low priority for those in the twenties and thirties. This type of plan could be made in a relatively painless payroll deduction environment that could encourage retirement savings without hampering job mobility. We'll see if it becomes law, and if the concept spreads.
Source: "Finally, a Retirement Plan for Job-Hopping Millennials," by Noah Weiland, New York Times, February 28, 2017.
If you watched the Academy Awards, you may have seen an ad for the new area in Disney World: Pandora--the Avatar planet. The fact that it is arriving on the scene now is evidence of the long product development timeline for a themed amusement park ride. The Avatar film came out in 2009, so it has been more than seven years since its release. Since then, several tie-in products have been developed:
One might think that it would no longer be the prime time to open such a ride, but other factors point to ways that it might generate revenue:
Moreover, the ride itself is rumored to be fantastic. I know someone who has experienced the"Flying Banshee" ride several times in beta-testing mode at the Los Angeles Disney Imagineering site, as part of the development of its music track. He says it is completely another order of magnitude better than any other ride--and he is a tough customer, having worked a year on the film, which required seeing the movie in segments thousands of times.
Source: "Imagineer Joe Rohde Talks Animal Kingdom and Pandora--the World of Avatar," from Walt Disney World press releases, February 2017.
image from bee line hemp wick
Wes Card is a beekeeper. He cares for his bees and harvests their honey for several months of the year. But, come spring, he ships his bees to Louisiana, Texas, New Mexico, Arizona and California--to put the bees to work as master pollinators.
Bees are a necessary part of the food production process of blueberries, almonds, strawberries squash, pumpkins, citrus fruits...etc. Without bees, the flowers of these fruits and nuts would not be pollinated and edible items would not form. To make sure this task is done, 30 BILLION bees are shipped to California's Central Valley alone. This means trucks and beekeepers and a distribution system--there is very little that is natural about the process of getting bees to where there is a concentration of food production. It is a business in the most fundamental sense.
The production and distribution of nuts and fruits made possible by the transportation of bees makes possible a production that far exceeds what would be possible if the process was "natural." In some ways, this is the quintessential quality of capitalism--to invest in components that will make possible a product that would not otherwise be possible.
One take-away from this might be that the agribusinesses that need bees to grow their crops might pay attention to the hive deaths that have been occurring. The underlying causes could be investigated--even if it would take additional investments. It appears that bees are a necessary component of the production process, so there would be financial benefit to this type of investment. Or is there an alternative?
Sources: "The Bees Go To California," by Robert Smith and Stacey Vanek Smith, NPR: Planet Money Episode 756, February 24, 2017. [transcript]